Rating agency Standard and Poor's (S&P) has warned that there is more 30% chance of India's sovereign rating being downgraded to junk status in the next 12 months. This is threat that is bigger to the Finance Ministry more than any other. For it will completely seal the prospects of economic recovery. For one, the junk status will dramatically raise the overseas cost of borrowing for Indian companies. Secondly, it will also adversely impact the country's image as a foreign investment destination. As per an article in Mint, international institutional investors have already invested over US$ 17 bn in India so far this year. The downgrade in rating will be a huge setback to them.

Although S&P's credibility and reputation in terms of quality of its ratings has hardly recovered since the 2008 subprime crisis, the 'junk status' threat is something that India cannot afford to ignore.